Which Way For Haleon Post-Glaxo Shareholder Shuffle?

The Haleon (LON: HLN) share price is rather bouncing around undecided post the Glaxo (LON: GSK) demerger. A couple of percent up one day, down the next, there seems to be an indecision about the market's valuation of the company. This is, perhaps, to be expected at this point and we could even think that there's going to be no overall direction to the HLN share price until the shareholder reshuffle is over. That shareholder shuffle being, at heart, the point of the demerger from Glaxo in the first place.

It's possible to track individual shareholder purchases – not in detail, but in aggregate – by looking at what varied brokers say are the most traded shares by their client base. Haleon is turning out to be – among those retail clients – a high volume both purchase and sale. Again, back in economic theory this is rather the point of the demerger. Assuming that economists do in fact know something that would mean that we'll really only see a proper direction of travel for HLN shares once this shuffling of holdings finishes.

That theory says that sure, diversification is our investing friend. But it is also true that different investors have different preferences, different appetites for risk, different views of the future. These two points are often in conflict. It's also true that there are two different ways of gaining diversification. It can be done at the corporate level – a company operates in many fields – or at the individual – the investor owns shares in many different companies, each of which do their own thing. The higher the costs of individual investing then the more the balance leans toward conglomerates, which have many business lines. The cheaper individual investing is then the more the other way – each company should do the one thing, diversification takes place at the investor choice of shares level.

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Given Haleon's £30 billion (approx) market capitalisation we might not think that any reshuffle of holdings will have much effect. But this is the marginal influence on the HLN share price. The big index funds will need to hold as part of the indices they track. Smaller “type” funds and us individual investors are the thing that changes.

This is also that economic theory reason for the demerger. Some were happy enough in that picture of pharma and consumer FMCG that was the pre-demerger Glaxo. Now, given the choice, some will prefer to be in pharma, some in FMCG. So, given the allocations of Haleon shares, there will be some selling, some buying, from those who wish to balance, or rebalance, their portfolios.

The implication of this is that there's a reshuffle going on. And we'll not know any direction of Haleon shares until it is over. Quite when that will be is obviously unknown but this is akin to what happens when there's a rights issue. Some are short term holders, looking to reallocate quickly, some are building core holdings. It's only when the new stock is firmly with long term holders that we gain a good idea of the long term direction of the share price.